High Achiever issue 4 1-9
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ISSUE 6
>
2006
THE SALWAYS –
A WINNING
TEAM!
CENTRE PAGES
High Achiever issue 4 1-9
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WELCOME
UK PREPARES F
> EDITORIAL
Wow! That is the best word I can think of to sum up this year’s
Property Industry Foundation Annual Dinner in aid of UNICEF. We
had a terrific turn out, once more, of the great and the
good, at the lovely Dorchester Hotel in London’s Park
Lane. Over 350 people attended – many in Chinese or
oriental dress in keeping with the theme of the evening.
We were all there to help raise money for UNICEF’s
projects in Vietnam – several of which I had visited
earlier this year.
It was a very emotional evening for
me, recalling orphans in institutions, children living on their
wits in streets running with litter (and worse) and young
mothers whose husbands had died from Aids, trying to
nurse sickly infants who, in all probability, would die from
the disease too. It was a gruelling – but eye opening –
experience and seeing the UNICEF care workers making such a tremendous difference to
the lives of these people was truly inspiring.
Lord Puttnam, who accepted the cheque for £150,000 – the record breaking total
raised by everyone who attended – gave a very moving speech talking of a recent life
threatening illness he himself had experienced. He said: “I found myself assessing my
life’s achievements and realised it is my work with UNICEF that makes me most proud.”
Sir Digby Jones, our speaker for the evening, also reflected this sentiment in
saying how important it was that the property industry gives back to those on the very
limits of society.
We also, of course, present the Property Industry Foundation Award for High
Achievement at the PIF Annual Dinner. This year – against very heavy competition – the
Award was won by Francis Salway, Chief Executive of Land Securities.
Francis, who praised his wife Sarah for her support throughout his
career, was the runaway winner this year. He achieved a record number of
votes from the major decision makers in the UK property investment
market. So well done Francis! Land Securities is clearly perceived to be in
very good hands.
The runners-up (in alphabetical order) were: John Carrafiell from
Morgan Stanley, Rupert Clarke of Hermes, Toby Courtauld of Great
Portland Estates, David Higgins from the Olympic Delivery
Authority and Andrew Strang of Threadneedle Property
Investments. Andrew is among those featured in this issue.
From the way the votes spread out – had Francis not been
on the list – almost any one of these would have won. So well done to all of you!
I hope you will enjoy this edition of The High Achiever magazine – we
have some fascinating articles for you. I was particularly interested to
read the interview with Ray Palmer of Palmer Capital Partners – what a
clever chap Ray is! He has created an original, and highly successful,
business that goes from strength to strength. Just as well really as he is still
producing children at his ripe old age!
I just want to end by saying a HUGE thank you to everyone who
supported the Property Industry Foundation Annual Dinner – not
forgetting all those who helped organise the event: Ann Cadogan and her
redoubtable team, Georgina and Paula from UNICEF, Amy from Vogue and the excellent
hotel and banqueting staff. The Executive Chef, Henry Brosi, deserves a special mention
for serving up a terrific menu of some of the best Asian-fusion food I have eaten – quite
a feat when you are catering for 350 covers!
Patricia M Kerr
Managing Director
Kerr Ingram Executive Search and Selection
>
n January 1 next year the UK finally,
and perhaps belatedly, joins the $400
billion real estate investment trust
‘club’, leaving Germany as the only G8
country that is yet to embrace the concept
of REITs.
After a period of dynamic growth over
the past two decades, REITs are a major
factor in many of the world’s leading
property investment markets, including the
US and Australia, the two countries that UKbased forecasters have generally used as the
starting point for predicting what may or
may not happen here.
O
According to Francis Salway, Group Chief
Executive of REIT-to-be Land Securities, the
evidence points to a period of change and
growth, but on an evolutionary or gradual basis.
He explained: “If you look at the point to which
REITs have evolved in the US and Australia, there
has been phenomenal growth of the REIT
sectors, but it is a process that has taken some
15 years. So it is wholly unrealistic to expect
sea-change in the UK market from day one.
Given the current market capitalisation of the
quoted property sector it’s going to take some
time for a new breed of shareholder to be
attracted to the UK REIT sector and to drive its
future growth.
“What is very likely is that property
companies becoming REITs will offer a higher
income yield to their investors from the
outset. In Land Securities’ case, while our
mandatory level of distribution as a REIT
(set at 90% of taxable profits) is very similar
our current dividend, we expect to increase our
dividend by some 25%-30% on a full-year
basis, paying out to our shareholders the
corporation tax we will no longer be
paying to the government.”
Salway believes that the
big property companies are
well prepared to become
REITs, thanks to a prolonged
period of working out the
legislative detail with the
Treasury and the Inland
Revenue, which has given
them – and their advisors –
time to think about how
they’ll structure their
businesses.
Similarly,
the major institutional
shareholders have talked
at length with property
Photo: Image Source/Rex Features
2
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NEWS
3
S FOR THE BRAVE NEW WORLD OF REITS
to be kept at the top of the agenda by the REIT
task force, which has been established by the
BPF and also has representation from the RICS
and the IPF.
The task force will be in ongoing dialogue
with the government aimed at ironing out the
wrinkles in the UK REIT structure, together with
pushing for AIM listed and unlisted REITs.
But all these issues are for the future. In
the meantime, it’s fair to say that from January
1 the UK property market will never be quite
the same again. Welcome to the brave new,
post-REIT world.
Photo: Image Source/Rex Features
REITs – a two
minute guide
that this particular group has driven a good deal
of the market’s growth in the US and Australia.
In recognition of this, the body ‘reita’ has
been established, to act as an information
resource about all things REIT, as well as forging
a bridgehead to the Independent Financial
Advisors (IFAs) who serve the private
shareholder community.
Reita is backed by the BPF and IPF, together
with a who’s who of leading quoted property
companies, fund managers and
investment banks. It has already
helped to generate positive
coverage for REITs in the personal
finance sections of the national
press, something Salway, who
sits on the body’s Executive
Committee, hopes it will build on.
If there’s one area of the
market that has not, so far,
embraced the advent of REITs, it’s
Francis Salway
the residential property sector.
This is understandable, with the
low yields on residential property sitting
uncomfortably with the positioning of REITs as
an attractive income play. Some residential
property companies have also found that their
profits generated from trading activities are
not tax-exempt REIT income flows, making
conversion less attractive under the existing
legislation.
These and other technical points are sure
companies and have read the analysts’ papers
on the subject, so are equally well-briefed
on the implications and
opportunities of REITs.
The private investor,
on the other hand, is
thought to be lagging
behind on the REIT
learning
curve, a
significant issue given
“WE EXPECT TO
INCREASE OUR
DIVIDEND
BY SOME
25%-30%.”
REITs in their modern form date back to the
1960 real estate investment trust tax
provision signed into law by American
President Eisenhower, although it was not
until the 1980s and 90s that the market
started to take-off in the US.
A REIT is a quoted company that owns
and manages income producing commercial
and/or residential property. To qualify as a
UK REIT the company must have a London
Stock Exchange listing, a portfolio of at least
three properties with no single property
making up more than 40% of the total value.
No owner-occupied properties are allowed
into a REIT structure.
Upon conversion to a REIT the property
company must pay an initial charge of 2% of
the market value of its rented properties.
After that it must pay out at least 90% of its
annual taxable income to its shareholders, in
return for which it is largely exempt from
corporation tax.
The attraction to property companies of
becoming a REIT is the removal of ‘double
taxation’ – corporation tax plus tax on
dividends – which has previously been
imposed on UK property funds. For private
investors they offer a highly liquid form of
property investment, as well as the type of
direct access to the benefits of a diversified
commercial property portfolio that has
previously only been available to the very
wealthy or institutional investor.
5 For more information about REITs, see the
website www.reita.org
High Achiever issue 4 1-9
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SPOTLIGHT ON JOHN LEWIS
JOHN LEWIS GOES FOR G
In a rare interview, Jeremy Collins, Head of Retail Development for John
Lewis, gives The High Achiever an insight into the values and objectives
that are driving the partnership’s ambitious expansion strategy.
>
ritish retailing has long had its heroes
and villains, it has seen fortunes won
and lost and many legendary names
become footnotes to history. But John
Lewis, with its rock-solid partnership
structure, its strong brand identity and
familiar mantra of ‘never knowingly
undersold’, has sailed serenely on through
the decades.
B
Within the group’s property department,
that serenity was given a jolt with the
announcement in 2003 of an ambitious
expansion programme to open 10 new
department stores in 10 years – adding 50%
more selling space in the process.
Around the same time, a proposal was
tabled to de-centralise the property function
and relocate the teams responsible for John
Lewis and Waitrose within those operating
companies.
“The move made a lot of sense as it
enabled us to become business focused as well
as property focused,” explained Jeremy Collins,
John Lewis’ Head of Retail Development.
Although the majority of John Lewis stores
are on long leases, Collins and his team also
have a £1 billion freehold portfolio to actively
manage, which includes a handful of stores,
plus service buildings and distribution centres.
All stores are reviewed each year in order
Artist’s
impression
of the new
John Lewis
store in
Leicester,
which opens
in 2008
The partnership’s landmark Peter Jones store
in Sloane Square has enjoyed sparkling sales
figures since the completion of its £107
million refurbishment
to find things that can be done to improve
their trading potential. “We work very closely
with the business, while also developing our
relationships with landlords and local
authorities.This is very much a forward-looking
process, and we have a strategic involvement in
local planning policy, transport policy and any
other areas that influence the trading potential
of our estate,” he continued.
Collins makes no secret of the fact that
John Lewis can be a demanding tenant for
property developers and local authorities to
deal with. This is hardly surprising given the
investment – upwards of £40 million –
required to fit out and stock one of its
department stores, not to mention the power
it wields as a highly attractive anchor tenant.
But, he adds, this doggedness aims to be
good for all sides. “We care passionately about
everything that affects our business, and we’re
determined to engage at all levels necessary to
make things happen. But the bottom line is
that if it works for us it should work for the
landlord, the developer, the local authority and
the local community – that’s the virtuous
circle we aspire to.”
Keeping a strong heart beating in Britain’s
major towns and cities is clearly a personal and
professional passion for Collins. Of the seven
locations so far announced for new John Lewis
stores as part of the current expansion, only
one is out-of-town, and several projects have
strong inner city regeneration credentials.
One of these is in Leicester, where a
stunning new store will be opening in 2008 as
part of a £350 million extension of the Shires
shopping centre, being undertaken by
Hammerson and Hermes. The project, which
also includes apartments and leisure facilities,
will more than double the selling space at
the Shires.
More importantly, the project represents
a key part of the regeneration masterplan
for Leicester city centre currently
being implemented by Leicester
Regeneration Company and
Leicester City Council.
Collins continues:
“This development
is a good
example
of the
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SPOTLIGHT ON JOHN LEWIS
R GROWTH
mutually-beneficial relationship between developer,
anchor tenant and local authority. The Shires must
integrate with Leicester city centre and enhance it
as a place to shop; equally we’ve worked closely
with the council to identify and agree a package of
improvements to the city centre which will make it
a more pleasant place to be. It’s critical that the new
development and its surroundings create a powerful
first impression on the shoppers it will draw back to
Leicester – or who’ll visit for the first time.We won’t
get a second chance with a lot of these people.”
The John Lewis estate is set to number 36
stores by the time the current expansion is
complete in 2013, but that’s unlikely to be the end
of the growth story. In scouting potential locations,
the retailer has a number of criteria that must be
satisfied, the key one being scale – a 240,000 sq
foot John Lewis store is a “big beast” as Collins puts
it, and not every retail development, or town, can
accommodate it.
But John Lewis also looks for the ability to
create the right configuration and footprint for the
store, as well as its integration and visibility within
the mall. The development itself must – like the
Shires in Leicester – work within the context of the
wider town or city; and of course the allimportant transport links must
be strong.
The transport issue
includes one thorny
area that John Lewis
is
particularly
engaged with:
congestion
charging.
Collins argues: “Despite suggestions in the popular
press that we are fundamentally against congestion
charging, in fact we’re not against it in principle, but
we do think it needs to be managed and
implemented very carefully. In particular the powers
that be must be mindful of the need to sustain
businesses that are keeping our towns and cities
thriving. We’re working with a whole raft of
organisations on this issue, trying to find the
right answers.”
It won’t be the only debate where John Lewis
will be looking to flex its muscles, either. Collins
concludes: “There’s a challenge for retailers and the
retail property industry to communicate more
effectively with one-another, to gain a better
understanding of our respective motivations, needs
and wants. The relationship still tends to be quite
feudal, a situation that has been reinforced by
legislation. But it’s essential that the wider industry
gets together to have an informed debate in areas
like rents and other key issues, before that vacuum
is filled with more legislation, which almost
certainly won’t help.”
You can be sure that, when the time comes to
talk turkey, John Lewis will not
be afraid to speak its
mind.
5
About
Jeremy Collins
Some might describe it as ‘poacher
turned gamekeeper’, but moving from a
retail property developer to one of
Britain’s most famous retailing names has
been a real eye-opener for Jeremy Collins.
“It’s been very
refreshing to have
to think every day
about how I can
apply my expertise
to
help
the
business grow, as
opposed to being
focused purely on
property. People in
retail
property
often claim to
understand
all
about retailing, but
Jeremy Collins
I realised very
quickly
after
joining John Lewis that I had plenty to
learn about what drives a retailer’s
business,” he said.
Collins’ November 2003 move to
John Lewis was perfectly timed, as it
coincided with the partnership’s
announcement of plans for a major
expansion (see main story).
Before joining John Lewis he’d been
head of retail for Lend Lease, overseeing
projects in Norwich and Milton Keynes,
among others. Perhaps the highlight of
his time at Lend Lease, though, was the
opportunity to steer the development
of the Touchwood shopping and
entertainment centre in Solihull – which
incidentally has John Lewis as anchor
tenant – from the initial acquisition of
the site right through to the first day of
trading.
Although his CV also includes
spells at MEPC and Grosvenor Square
Properties, Collins’ first taste of the world
of property came at Wirral Borough
Council on Merseyside. Working in the
council’s Economic Development Unit he
was involved with a number of
regeneration projects, helping shopkeepers located in designated ‘retail
improvement districts’ to obtain grants
to spruce up their premises, as well as
managing enhancements to the public
realm in those districts.
High Achiever issue 4 1-9
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FEATURE
BALANCING A £3 BILLION
RETAIL PROPERTY PORTFOLIO
nce the owner of several renowned
high street names – including
Woolworth’s and Superdrug in the
UK – Kingfisher has divested these interests
to become a focused, international home
improvement specialist.
O
higher than in the UK and, while these
yield gaps have narrowed, there’s scope
for further price rises to close them.”
Kingfisher takes an active approach to
managing its property portfolio. Recently it hit
the headlines with a £198 million freehold
In the UK it operates
the clear market leader,
B&Q, while in France the
two-punch combination
of Castorama and Brico
Dépôt also give it the
number one position.
While these two
markets drive a high
proportion of Kingfisher’s
total sales, much of the
Group’s recent growth
has come from an
international expansion
programme that now
sees it operate in its own
right in China, Taiwan,
Korea, Poland, Italy, Spain
and Russia, as well as with An active property management strategy helps provide
partner Koçtas in Turkey Kingfisher with the capital to invest in its stores, such as the
and through a strategic new-look B&Q Warehouse in Wednesbury, near Birmingham
shareholding in German
DIY chain Hornbach.
sale of seven B&Q stores to British Land.
Naturally this global spread of operations
By reducing its UK exposure, the deal helps
means Kingfisher has a vast array of property
rebalance Kingfisher’s international property
assets to manage. The Group’s freehold
mix.
property, which made up 69 per cent of the
Hartwell added: “Commercial property
total at the last count, was recently revalued
values in the UK have been so strong that
at £3 billion for the year ending January
we feel it’s prudent to skim a little off
2006. The £600 million increase on the
the top while the going is good. We
previous valuation reflected rising commercial
still have some £900 million worth
property values in the UK and throughout the
of freehold assets in the UK and
Euro zone, where the bulk of its freehold
we expect to add properties worth
assets are located.
another £150 million to that through
Group Property Director Terry Hartwell
acquisitions and development in the
told The High Achiever: “There has been plenty
coming year.”
of speculation that these good times will soon
The deal also had some added
come to an end and the market will suffer a
attractions for B&Q, notably a very
correction. My own view is that even if there
flexible 20-year lease agreement,
proves to be some short-term weakness in
rents indexed to the annual RPI
certain countries, commercial property is
capped at 3% per annum and an
ultimately a very safe bet.
early break clause so that B&Q
“Looking at property values in countries
can walk away after 15 years if
such as France, Poland and Italy it’s also clear
it chooses.
that yields are still several percentage points
Terry Hartwell
Kingfisher’s decisions to go down the
freehold or leasehold route for new store
acquisitions are driven by practical as well as
strategic reasons, with each case looked at on
its own merits.
“That said, in new, emerging markets or
where we are experimenting
with a format, we’ve tended
to buy sites and build the
stores ourselves, so that if
we’ve got our business
strategy wrong or the
numbers don’t add up it’s
easier to exit those markets.
However, some markets, such
as China, have a dearth of
readily available freehold
property; or our partner might
prefer to enter into leases, as
is the case in Turkey,” Hartwell
noted.
What is clear is that,
with property forming
such a significant chunk
of Kingfisher’s overall
asset base, managing it
successfully can contribute not just bottom
line performance but
also
provide
the
all-important
capital
necessary for future
growth.
High Achiever issue 4 1-9
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FUNDS FOCUS – THREADNEEDLE
THE SECRETS OF SUCCESS
>
n any walk of life, getting to the top is
tough, staying there tougher still. So
Threadneedle Property Investments’
monopoly of the top five positions
against the IPD Monthly Benchmark
over a 10 year period is undoubtedly an
extraordinary achievement.
I
Asked to reveal the secrets of
that success, Managing Director
Andrew Strang cites focus and
specialisation. “First of all
we’re very focused on fund
performance – that’s
what our clients want
and that’s what we
need to provide.
Second,
having
bought a property, we
focus very hard on
asset managing it.
“Everybody in the
business will tell
that story, but we have a very strong track
record of actually doing it.
“Just as importantly, we look to recruit
specialists in property management, asset
management and fund management,
and we keep the asset and property
management areas separate, to get the
best from both.”
the property management division has its
own Director, David Price. His team’s
‘clients’ are the asset managers, who in
turn report to the fund managers. The fund
managers themselves are required to be
active players in the property investment
market, spending around 75% of their
time on market-facing activities.
Strang continued: “Our fund
managers are constantly on the
lookout for property investments that have the potential
to beat the IPD Monthly Index.
As a house we’ve tended to
steer clear of prime properties,
which are perceived to have the
lowest risk, but also have the
lowest yield and, as a result, will
tend to under-perform over the
market cycle. Instead we look
for buildings where there is the
scope for greater yield margin,
which may be prime in some
aspects but not in others. This gives us
more upside potential, particularly when
we can bring our asset and property
management strengths to bear.”
But, like other commentators, Strang
acknowledges that the market could be
near the top of its present cycle. “The
market, driven by sheer weight of money,
has become expensive, and some believe
that prices have overshot. It’s difficult to
predict how the story is likely to end –
currently there are more buyers
than sellers out there. If more people
decide to take their profits while prices are
very close to the top, then this will help
them to produce a balance between
buyers and sellers."
“Some say this could all end in tears, but
I think for a collapse in prices to be
triggered there needs to be forced sellers,
and at this moment it’s difficult to see
what particular category of investor might
become a forced seller. Without this
factor, it’s more likely the market will
settle down to be a little bit boring, based
on fund performance of the income
return, with rental growth offsetting a drift
in some property values.”
“FIRST OF ALL WE’RE
VERY FOCUSED ON
FUND PERFORMANCE
– THAT’S WHAT OUR
CLIENTS WANT.”
Andrew Strang
This separation, Strang believes,
gives very clear lines of responsibility.
It also means the routine but still very
important tasks that keep a
property in good shape are
not overlooked in favour
of more exciting asset
management deals, such as
lettings and rent reviews.
To emphasise that
degree of separation,
7
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PIF ANNUAL DINNER
PROPERTY INDUSTRY FOUNDATIO
DINNER SMASHES FUNDRAISING R
Land Securities’ Francis Salway received this year’s Property Industry
Award for High Achievement. Another big winner at the third Property
Industry Foundation Annual Dinner was children’s charity UNICEF.
>
ore than 350 of the UK’s top
property people were greeted
with a dazzling display of
Chinese dancing as they arrived at the
Dorchester Hotel on September 21 for
the Property Industry Foundation Annual
Dinner in aid of UNICEF.
The event is now in its third year
and, as its organiser Patricia Kerr noted,
M
it just keeps getting better and better. If
last year’s total of more than £117,000
raised was excellent, then the cheque for
£150,000 presented by Patricia to
UNICEF UK President Lord Puttnam this
year was even more impressive.
Lord Puttman introduced a short
film of Patrica’s visit to Vietnam earlier
this year. This reinforced the important
work UNICEF carries out and the impact
it has on the lives of those it seeks to
help. Donations from the evening will
be used to support the valuable
work of UNICEF volunteers working in
Vietnam.
The presentations encouraged
people to dig deep, and the outstanding
generosity shown by those present on
Sitting at the ‘top table’ this year were (standing, left to right) Manish Chande, Philip Warner, Sir
Digby Jones, Nick Ritblat, Sarah Salway and George Iacobescu. Seated (left to right) are: Patricia Kerr,
Lord Puttnam, Rebecca Willis, Ron Spinney, Martin Moore and Francis Salway
The evening’s Master of
Ceremonies Paul Campion also
entered into the Oriental spirit
High Achiever issue 4 1-9
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PIF ANNUAL DINNER
9
ON ANNUAL
RECORD
the night was a credit to the property
industry.
The serious side to the evening was
lightened by the former head of the CBI,
Sir Digby Jones, who entertained the
audience with a typically robust and nononsense speech in which he satirised
current planning procedures, praised the
UK property industry as a great creator
of wealth but also underlined the
importance of assisting those who are
excluded from society.
Sir Digby then proceeded to the
moment everyone had been waiting for
and revealed the winner of this year’s
Property Industry Award for High
Achievement, for which there were more
votes this year than ever before.
The winner was Francis Salway, Chief
Executive Officer of Land Securities,
who overcame stiff competition
from an impressive shortlist to
take the prize.
A delighted Salway thanked
his fellow directors at Land
Securities,
adding: “I’m
extremely excited to have
won this year’s Award, which I
think is a great reflection on
what we have accomplished
this year at Land Securities.
Being recognised with the
Award is particularly poignant
for me since my father,
who was also in the property
industry, passed away during the
last year.”
Salway was presented with
the traditional silver Armada
plate to hold for a year and, like
the award-winners before him,
he will also sit for a portrait by
the artist Peregrine Heathcote.
Congratulations also to this
year’s runners up, who were
John Carrafiell, Co-Head of
Morgan Stanley Real Estate,
Rupert Clarke, Chief Executive
of Hermes Property Asset
Lord Puttnam receives the cheque for this
year’s funds raised by the PIF Annual Dinner –
an astonishing £150,000
Congratulations to this year’s runners-up in the Award for High
Achievement, who are pictured with Awards presenter Sir Digby
Jones (third from left). They are (left to right) Andrew Strang,
Rupert Clarke, Toby Courtauld, John Carrafiell and David
Higgins
Management Ltd, Toby Courtauld, Chief
Executive of Great Portland Estates,
David Higgins, Chief Executive of
the Olympic Delivery Authority and
Andrew Strang, Managing Director of
Threadneedle Property Investments. Each
received a crate of vintage wine and a
silver salver for reaching the final
shortlist in the open vote by their
industry peers.
UNICEF UK
President Lord
Puttnam talked of
his pride at working
for the charity
continued on page 10
High Achiever issue 4 1-9
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Page 10
PIF ANNUAL DINNER
continued from page 9
PROPERTY INDUSTRY FOUNDATION ANNUAL
DINNER SMASHES FUNDRAISING RECORD
Spectacular
Chinese
dancing
entertained
guests at this
year’s PIF
Annual Dinner
Land Securities
CEO Francis Salway
(left) receives the
Award for High
Achievement from
Sir Digby Jones
SIXTY YEARS ON AND
NO LET-UP FOR UNICEF
UNICEF celebrates its 60th birthday in 2006,
but faces greater challenges than ever
before in its efforts to protect vulnerable
children across the world.
In the UK, the charity is alarmed that
500 unaccompanied Vietnamese children are
facing deportation, some of whom have been
victims of trafficking. A number of Vietnamese
children have been found in the UK, forced to
provide ‘slave’ labour in brothels and cannabis
factories. UNICEF UK believes that without
ensuring adequate safety measures are in
place, returning the children to Vietnam could
again put them at risk of abuse and
exploitation, and is urging UK citizens to write
to their MPs to raise awareness of the
issue.
UNICEF UK is also spotlighting
violence and abuse against children
in residential institutions in Europe
and Asia – which could number
anything up to a million, many of
whom are virtually unaccounted
for.
For more details on these and
other UNICEF UK campaigns, see
the website www.unicef.org.uk
Dorchester Executive Chef Henry
Brosi prepared a spectacular
spread for guests at the Dinner
The winner of the Property Industry Award for High Achievement each year gets their
portrait painted by the artist Peregrine Heathcote. A prodigy who at 12 became the
youngest member of the Heatherly school of art in Chelsea, Peregrine honed
his skills at the Fine Art Academy in Florence. This year Peregrine has worked
on two commissions, as the Award was shared by CBRE’s Martin Samworth
(above left) and Mike Strong (above right)
High Achiever issue 6 11-16
18/10/06
07:27
Page 11
AGENCY WATCH
A STRONG INDEPENDENT
>
services sectors, but the arms race is not
about who can pay more, it's about culture.
n a change to the usual Agency Watch
format, Michael Hatt, Chairman of
Nelson Bakewell, gives a very personal
view on the firm as well as some of the
influences that have shaped his business
philosophy.
I
On Nelson Bakewell…
Nelson Bakewell has found a new strength
from its independence. At just under 400
strong and now pushing close to a £40
million turnover this year we are still a
relatively small company but we are
growing fast and we have huge ambitions.
The property services market is simply
massive – with new ownership entities and
new investors arriving on a daily basis the
opportunities continue to spring up. Our
strategy is very simple – to offer our clients
the very best people. We will continue to
grow and, if we possibly can, to innovate a
little too!
On people…
Businesses that require their people to
deliver intellectual input and customer
service are essentially run on passion
and conviction. Great systems, reward
structures and sumptuous offices all play a
part and can without doubt enhance
business performance, but in my view
these are not the heart and soul of a
successful firm.
Imagine a scene, more importantly
imagine the excitement
– as a small group of
people come up with an
idea
that
they
all believe in. They
can see potential, they
are excited, they are
thinking. They are
committed in a way
that run of the mill
‘employment’
can't
generate. They don't
waste
time
with
politics, they work as a
team; they think and act without
prompting. They get in early, looking
forward to the next day and to what they
can achieve.
Generating this kind of cultural
excitement has typically been the domain
“THE BALANCE OF
POWER BETWEEN
EMPLOYEE AND
EMPLOYER IS
ALREADY
CHANGING.”
of the ‘super heroes’ such
as Sir Richard Branson or
Steve Jobs of Apple, whose
businesses have been
catapulted to success on
pure enthusiasm (plus, of
course, hard work). I believe
that culture can also play a
huge part in the success
of a professional services
business. Of course people
need to feel respected, engaged and
supported but more importantly they need
to feel excited.
The balance of power between
employee and employer
is already changing and
we’ll see a more dramatic
shift over the coming
years. Employees will
interview
employers.
Reward,
opportunity
and remuneration will
become a given and
decisions
will
increasingly be made on
how it will actually feel
to the employee to work
for ‘Company X’.
This is in effect the beginning of a
cultural arms race between the numerous
competitors within the property advice
and services market. The brands may
change over time if consolidation
continues as it has in other professional
“OUR STRATEGY
IS VERY SIMPLE –
TO OFFER OUR
CLIENTS THE
VERY BEST
PEOPLE. ”
On innovation…
In the last 25 years or so there have been
some important innovations that have
materially affected the workings of a firm
of surveyors but they are not property
specific. Post to fax to email to
videoconferencing is one. Paper and
calculator to spreadsheet and then to fully
functioning financial model is another.
We’ve also moved from filing cabinet to
database to portal, from paper to
digital, and from briefcase to mobile phone
to PDA.
From a property
specific standpoint
innovation appears
to be quite rare.
Some
notable
exceptions
of
innovative products
– such as business
parks, out of town
retailing, PFI deals,
serviced offices and
Michael Hatt structured finance –
have had an influence, but there is
actually quite little to shout about from
the property services side.
For the next decade, and specific to
property services firms, I can see e-trading
and e-management as being the inevitable
structural innovations in the property
services world but perhaps the biggest
opportunities for innovation lie in the
realm of people, though I'm not sure what
they are yet!
On inspiration…
If I could work with the people who
designed the cities for the Star Wars
movies then I would! There are so many
great people out there but I would
highlight Sir David Attenborough because
he has delivered 100% sincere enthusiasm
relentlessly for over 50 years. He’s
unflinching and always totally absorbing.
I have not met him but I have listened
carefully to absolutely everything he has
ever said, and he strikes me as a very
accomplished man.
11
High Achiever issue 6 11-16
12
18/10/06
07:27
Page 12
INTERVIEW
LIFE AFTER HAMMERSON
>
HA: On the flip-side, is there anything
that you’d have done differently, with
the benefit of hindsight?
nyone who thought Ron Spinney
would ride off into the sunset after
his retirement from Hammerson
last September has been very much
mistaken. After handing over the
Chairman’s role to John Nelson he’s
taken on a variety of new ventures, while
also finding the time to indulge a few
personal pleasures.
A
The High Achiever caught up with
Spinney recently to look back over his
career at Hammerson as well as running
the rule over today’s property marketplace.
The High Achiever: How is life after
Hammerson?
Ron Spinney: It is very agreeable and
fulfilling, thank you! I’ve always enjoyed
the commercial world and I’d decided some
time before leaving Hammerson that I
wanted to remain in the business to a
degree. Now I have a balance of positions,
some commercial, some that are nonremunerative, and I’m thoroughly enjoying
myself.
HA: You opted for a very clean break
from Hammerson – is that a particular
philosophy of yours?
RS: Absolutely. I believe that once you have
made the decision to leave you must go –
you should not cast a shadow over your
successor or successors. Also, through
knowing the people who were going to be
running the business after I left, I had
absolutely no doubt that they would make
a big success of it – and they
have. It’s worth pointing
out that, above all,
Ron Spinney is pictured with actress Barbara Flynn
and playwright David Wood at the launch of the
Unicorn Theatre for Children
Photo: Imagewise
Hammerson is a team and, as such,
it has a power that’s greater than
the sum of its parts
RS: With any business the size of
Hammerson there are inevitably some
individual opportunities either to sell or to
buy that we missed. However, I don’t feel
there are many where we really missed the
boat, and I wouldn’t change much in terms
of the overall direction the business took
during my time there.
That said, I
think we were
probably a bit
slow moving
into the retail
warehouse
market and we
made a mistake
in going into
Germany in the
way that we
Ron Spinney
did. We got
things right in
France, although if I had my time again I
would perhaps have expanded our French
business more quickly than we did. The
strength of that business is down to the
fact that we identified a strong leader
within the team there, Gerard Devaux, and
we built the business around him without
making the mistake of imposing our own
Anglo-Saxon style.
“CAREERS TEND
TO BE LED BY
CHANCE AND
MINE IS NO
EXCEPTION.”
HA: You’ve been widely praised
for your contribution to
Hammerson – what would you say
were your principal achievements
there?
RS: My main achievement was putting
together a team of people that could
release the potential of the business – and
add to it. That meant building a core of
quality not just at the main board level but
also at the ‘marzipan level’ and throughout
the group. Of the five executive directors in
place when I left, four had been with the
company when I joined, so it shows that
the talent was there. The challenge was to
give them clarity in their roles and
objectives so they
could deliver the
performance.
HA: Of all the developments that were
completed during your time with
Hammerson, which is your favourite?
RS: I have a few actually, all for different
reasons. The first was 99 Bishopsgate,
which we acquired in a badly damaged
condition after the IRA bombing. The fact
that we were prepared to buy when both
the building and the wider property market
were bombed out, then delivered a very
good product at the right time in the
market’s cycle, makes it a favourite. I’m
also pleased with the shopping centre we
did in Reading – the Oracle – which was our
first major piece of in-town regeneration. It
was well integrated into the town centre
and has a good mixture of retail, leisure
and other facilities. Inevitably the Bullring
in Birmingham is among my favourites,
High Achiever issue 6 11-16
18/10/06
07:27
Page 13
INTERVIEW
N IS SWEET FOR SPINNEY
finished at the end of last year. I’m
also involved at the Oval cricket
ground, with the Theatres Trust and
Greenwich University. Outside of
public life we have a house in
France which I enjoy; I play bad
tennis and bad golf. I love music,
and I’m also interested in gothic
church architecture and can now
pursue that a little more.
also there have been a couple of
buildings we developed in Paris
which I’m very pleased with. And
most recently the completed
Bishops’ Square project.
HA: If you could pick one
development by a rival
that you wish you’d been
responsible for, what would
it be?
RS: Among the marvellous things
that have happened in our sector
in recent years is that the quality
of buildings has substantially
improved. So there are a number
of developments that I admire
very strongly and would like to be
able to say I’d done. In central
London the obvious one would be
Broadgate – that’s a wonderful
scheme.
HA: How do you see the UK
property market evolving?
RS: There was a recent quote in the
Estates Gazette by John Plender,
which said “A welcome feature of
the last two decades is that
populist hostility to commercial
property has largely disappeared”.
And he’s absolutely right –
property development is now
looked upon with much greater
understanding and is seen to be
capable of delivering regeneration
and improvement to our towns
and cities.
To that you can also add the
fact that property companies are
now much more open and
transparent, and as a result
accounts and valuations are more
respected. I was proud to be
the founding chairman of the
European Public Real Estate Association
(EPRA), and there has been considerable
standardisation of PLC reporting as a result
of EPRA guidelines. All of this makes
the market more attractive to investors,
increasing liquidity and cementing
property’s place as an asset of choice.
That’s a great foundation for the industry
to build on and I think it will continue to
prosper and be hugely exciting.
Spinney lists the Bullring redevelopment (above)
among his favourite Hammerson developments,
while London’s Broadgate (below) ranks as one he’d
like to have worked on
HA: You’ve clearly enjoyed life
as a property man – what first
attracted you to property and
what kept you in this sector
over the years?
RS: Careers tend to be led by
chance and mine is no exception. I
was brought up on a farm and my
original intention was to become a
land agent. I came to London, went
to college in Kensington, and planned to
spend two or three years with one of the
big land agencies in central London before
going out to a provincial city or a major
estate. But I decided I liked London so I
stayed. By very good chance I was running
a Canadian property investment fund back
in the early 1970s, we were doing a small
project with a group of developers, and
they asked me if I’d like to join them. That’s
where it all began.
HA: Tell me about your involvement
with The Crown Estate?
RS: I’m a Commissioner, so I sit on the
Board and give my input in a similar way to
a non-exec on a plc board. The role is
extremely rewarding and I thoroughly
enjoy it. The Crown Estate is a fascinating,
diversified business, ranging from
agricultural estates to Regent Street, to fish
farming, to mineral extraction, and it is run
very much on a normal public company
basis, but with tremendously high regard to
the effects of the developments and
projects it undertakes. It is now under the
leadership of Roger Bright, who has done a
superb job – it was a pretty good set-up
when Roger took over, but he, together
with his Chairman Ian Grant, has turned
it into a very dynamic, well-managed,
forward-thinking organisation.
HA: Are there any pursuits outside of
the world of property that you’re now
finding a little more time to indulge?
RS: I’m delighted to be involved with the
Unicorn Trust, and perhaps the project I’m
most proud of is the new Unicorn Theatre
for Children, which I chaired and which was
HA: Finally, what nuggets of advice
could you offer to up-and-coming
property professionals as they forge
their careers?
RS: Always review any project, acquisition
or disposal on the back of very
comprehensive, well-researched information. Be prepared to be lateral in your
thinking. But most of all, be brave!
13
High Achiever issue 6 11-16
14
18/10/06
07:27
Page 14
FEATURE
PCP FINDS A UNIQUE REC
Having discovered a winning – and still unique – formula for backing
property development start-ups, Palmer Capital Partners is bringing
the same nous to bear in the worlds of fund management and
corporate finance.
t’s not often that you hear
someone in the property
business complain of being a
little too affluent, but for Ray
Palmer, Chairman and founder
of Palmer Capital Partners, the
money he’d accrued from
selling his shares in Lambert
Smith Hampton in 1992 was as
much a curse as a blessing
when he decided to go it alone
as a developer.
I
Ray Palmer
“At a time when much of the
property world had a ball and chain of debt
to carry, my liquidity should have been a
real advantage, but I found myself being
too cautious in bidding for opportunities,
frequently coming second or third behind
more daring entrepreneurs.While I managed to
do some business on my own account, I didn’t
feel it was anything like enough,” he told The
High Achiever.
But it was just that caution, born of a
couple of decades’ worth of frontline property
experience, coupled with Palmer’s financial
resources, that prompted Tim Holmes and
Peter Jarman to approach Palmer to invest in
their start-up property development business,
Wrenbridge Land.
“Aside from the funding, my role was to
provide some ‘grey haired thinking’ to balance
Tim and Peter’s hunger to do deals. My track
record also gave their business a perception of
substance, which was very useful when
negotiating funding or dealing with the
vendors of a site. The combination clicked
immediately – Wrenbridge made a profit
in its first year and has
done every year
since.”
More
importantly,
Wrenbridge gave Palmer a
perfect blueprint to make
further start-up investments
that would combine young,
energetic entrepreneurs and his
older, wiser head. Now PCP has
eight such investments and, as
The High Achiever went to
press, a ninth was due to be
announced.
But this is nothing
compared to the number of
approaches Palmer receives – two or three a
week at his estimate. To whittle them down to
the best of the best, Palmer uses very
demanding criteria.
“The first rule is that the directors can only
start to earn money once their business is
profitable. There are no guaranteed salaries;
otherwise people are really just swapping one
employer for another.That stipulation tends to
scare off all but the most determined – for
someone who’s in their mid-30s, and likely to
have family commitments, a willingness to
sacrifice earnings takes real self-belief and
shows us they are a serious contestant.
“We also look for businesses run by two or
more people together. I know from experience
that a solo dynamic is not a winner in
this market, you need someone to bounce
ideas off, or simply to celebrate success
with or offer a shoulder
to cry on if things don’t go so well.”
The toughness of the selection criteria is
justified when Palmer reveals that every one of
his development companies makes a profit – a
strike rate that would be the envy of many a
venture capitalist. Between them they now
have a property portfolio worth a cool
£2.2 billion.
Not surprisingly they’ve also been
recognised by their peers with a string of
awards. Three out of four nominees in the
Midlands Developer of the Year category at last
year’s Industrial Agents Society/Office Agents
Society Awards were PCP-backed, while the
PCP stable is short listed in no fewer than five
of the ten categories in this year’s IAS/OAS
Awards.
And PCP is in for the long haul too. Palmer
has no exit strategy in the way that a
conventional venture capitalist would
formulate as a matter of course.“Ours is a long
term view and we’ll never force any of our
companies into a flotation or trade sale,” he
continued. “Should any of them decide to go
down that route, and one or two are already
larger than some quoted property companies,
then we’ll support them
all the way. But this
hasn’t appeared on the
horizon yet.”
High Achiever issue 6 11-16
18/10/06
07:28
Page 15
FEATURE
ECIPE FOR SUCCESS
Given this record of prolonged success it
begs the question why – more than a decade
down the line – PCP is still the only company
doing what it does in the property market.
Palmer himself is bemused at this fact. “I
honestly don’t know why nobody has tried to
repeat this model, because it works brilliantly.
Maybe it’s not that transportable an idea? I
know one or two people in the market have
said they’re going to do it, but none have
followed through.”
Not wishing to stand still on the success of
its venture capital business, some two-and-ahalf years ago PCP set about launching a fund
management operation, to help generate a
flow of capital to finance developments
sourced by the various PCP development
companies.
After becoming regulated for fund
management activities by the FSA, PCP
launched the Palmer Capital Development
Fund, another ground-breaker, as Ray Palmer
noted.
“This was the UK’s first blind development
fund. But although it was blind in terms of the
properties it would eventually buy into,
through our development companies we could
not only offer a balance in terms of sector
expertise and geographical spread, we also had
a track record of quite exceptional returns – an
average of around 25% in the seven years prior
to the fund’s launch. Since it was established,
the Palmer Capital Development Fund is
averaging about 32% returns, so
investors are doing very
nicely.”
Phil Wade from agents TTZ, Gavin Bridge and Josh Roberts from Cubex Land, plus David
Burston from agents Burston Cook celebrate the launch of Bath Business Park. This 23-acre
development – Bath’s largest retail park – is being undertaken by PCP-backed Cubex Land,
with funding from the Palmer Capital Development Fund. The scheme comprises motor
show rooms, a proposed new private hospital, office and industrial buildings
Now, with around £560m spread across
the firm’s various funds, this part of PCP has
grown to be roughly equal to the venture
capital activities, with two directors occupied
with each and Ray Palmer straddling both
sides.
More recently, PCP has been
putting its talent
to good use in a third business stream,
corporate finance. Palmer see this as very
much a niche activity, and doesn’t want to
set up in competition with the corporate
financiers at big agencies such as Jones Lang
LaSalle, but the firm has already done some
innovative deals, including the acquisition of a
portfolio of Texaco petrol stations and
leaseback to Somerfield for development into
a convenience store format.
This £200 million transaction was one
of the largest ‘sale and leaseback’
development deals seen in the
UK in recent years, and helped
earn PCP’s Alex Price the
title of Young Property
Personality of the Year at
last year’s Property Awards.
Computer-generated image of thehub:mk in Milton Keynes. This
£400m scheme, being undertaken by PCP-backed Frontier
Estates, totals approximately one million sq ft. It is the first high
rise development in the 40 year history of Milton Keynes. Two
hotels, approximately 700 flats, a shopping centre and an office
building are currently nearing completion. Further phases will
comprise additional offices, a multi-storey car park, an apart
hotel, a new city square and additional retail units
15
High Achiever issue 6 11-16
07:28
Page 16
THE LAST WORD
> PROPERTY PEOPLE ON THE MOVE
>
16
18/10/06
MICHAEL BAKER
WILLIAM JACKSON
The blockbuster development projects at
Wembley and Greenwich Peninsula will
be a major focus of Quintain Estates’
Head of Development Michael Baker,
who joined the company at the end of
July from Hammerson.
He sees the move as a chance to
sample other facets of the property
business. “Having spent my 12 years at
Hammerson in the office sector, the
opportunity to broaden my experience
with mixed use schemes such as these was too good a chance to
pass up. After working at a giant like Hammerson, it’s also very
interesting to be part of a smaller, more fleet-footed business,”
Baker explained.
Outside of the capital, Quintain is also developing the joint
venture it signed last year with BioRegional Properties Ltd, which
aims to create sustainable, zero carbon emitting communities.
“This type of scheme is already in the spotlight across the
property market, but with local authorities across the country
pledging to support low or zero carbon developments, it looks
set to take centre stage in the coming years,” he added.
The capital’s transport hubs and major
landowners will be the main areas of interest
over the next few years for William Jackson,
Cushman & Wakefield’s Head of Central
London Development.
Having joined Cushman & Wakefield just
before Christmas 2005 citing the partnership
culture and the new challenge as reasons,
William has been identifying areas ripe
for development in central London in
the fields of management, consultancy,
acquisition and disposal.
William said: “Transport hubs in London are the first places visitors
to the capital see, yet often they are the most run-down,
underdeveloped parts of town.These transport hubs are entrances to
the city, so they should be a celebration of London and need to be
welcoming, not somewhere people are seeking to get away from.
“In addition, major landowners in the centre of London will also be
an interesting area for growth. Hospitals, charities, trusts and landed
estates that don’t have development expertise in-house will need
advisors, especially with the many changes in development
legislation we’re seeing.”
ABOUT KERR INGRAM
> Kerr Ingram is the leading Executive Search and
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Over the past 20 years we have achieved a near 100%
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